Nabucco doubts have upside for Nord Stream and South Stream

The EU commission has excluded the Nabucco pipeline from its list of priority projects. The change in mood by the European Union may speed up the construction of South and Nord stream pipelines.

The Nabucco gas pipeline via the Caspian Sea to the west will not receive the necessary 250 million euro the EU had planned to invest, after a decision taken on Thursday. Members of the EU commission have questioned Nabucco’s urgency amid low energy prices and economic recession.

The head of Russia’s Gas Society, Valery Yazev, also sees political reasons behind the EU’s move to drop its previous enthusiastic support.

“The Nabucco project was mainly backed by the former US administration. It found grounds for the realization of the project after the gas conflict with Ukraine. The new administration has a more constructive approach to relations with Russia. It doesn’t make sense amid a crisis to build a multi billion dollar pipeline with no gas – simply in order to punish Russia.”

Without EU finance the future of the $10 billion pipeline is vague. Money is not the only problem. There isn’t enough gas to fill the pipeline, Aleksandr Nazarov, Analyst at Metropol investment says.

“The only gas that can fill Nabucco is Turkmen gas – to reach it they will need to build another pipeline – Transcaspian – that will double the cost of the project.”

Market watchers say Russia-backed Nord stream and especially South Stream pipelines may now gain additional support in the European Union. Nord Stream will start operating in 2011 transporting gas from Yuzhnorusskoe and later on from the offshore Shtockman gas fields to Europe.

Russia also plans to launch its South Stream pipeline in 2016 delivering up to 47 billion cubic meters of gas annually to the European clients. Gazprom plans to finish the feasibility study of the entire route by July next year.